Fundraising may be drying up for some segments of the tech industry right now, but one area that continues to get a lot of attention is AI and especially the startups that use it. to create income-generating businesses. Today, a startup called Zappiwhich built a market research platform that uses AI and automation to speed up processes (and cut costs by about 10x), announces that it has raised $170 million to expand its activity.
The majority of the investment comes from Sumeru Equity Partners, with undisclosed co-investors. Zappi also doesn’t comment on its valuation with this cycle, but as a company-sized brand: Zappi was profitable until about a year ago when it shifted gears to expand; before that, it had only raised about $22 million since its inception in 2012 (with previous backers including WPP); and at the end of last year, it broke about $50 million in revenue. (Note: don’t try to use multiples of this to determine valuation: it’s a metric that seems to be everywhere at the moment, ranging from 12x revenue to 20x, and I’m sure there are higher and lower examples, too.)
Zappi now has some 350 clients, huge FMCG companies like PepsiCo, McDonald’s, Heineken and Reckitt, and the core of its product is that it helps these clients conduct idea surveys as they evaluate types of products to be developed as well as the first information. on how best to market them. Zappi is mostly used in the pre-product stage, CEO and co-founder Steve Phillips said in an interview. He said the market he is targeting is huge: $90 billion is spent on consumer information and market research every year.
Typically, such market research can cost these large FMCG companies up to $20,000 and take between four and six weeks, with lengthy user panel surveys and then numerous data into something that can be used. Zappi’s argument is that for $2,000 he uses a mix of human surveys – he integrates with other companies that build these respondent networks and can get up to 300 or 400 people per campaign – more lots of other data, including its own consumer database which it says is made up of 1.2 billion data points – to complete the same search in four to six hours. This research is accompanied by reports that can also be used by Zappi customers in their broader internal analyses.
The gap in the market that Zappi is targeting is the fact that many FMCG companies don’t have much digital DNA going for them. You can tell this by the fact that the products themselves are physical consumables, but also by the fact that the products are localized in the way they are manufactured and distributed, typically using analog channels like stores and through third parties to do so. It also means, Phillips said, that they’re “flying blind when launching a new product.”
Companies could go so far as to invest in developing new products to test, even before knowing if they would fly with users, which means that a lot of costs could be invested in something that may never hit the shelves. from any store. “We thought we could automate this process to make it faster.”
AI is making big waves in the non-tech world among businesses that want to tap into it to speed up their operations, and that preceded the arrival of the Covid-19 pandemic. (One of Zappi’s big customers, PepsiCo, for example, has used other AI implementations in product development to years.)
But the pandemic was keenly felt in this world, precisely because of the way many of these products were fundamentally tied to physical supply and distribution chains. The fact that all of this needed to be redesigned definitely gave digital transformation a boost and opened companies up to working with companies like Zappi in areas such as marketing and market research, said Phillips.
“We see a world where every business wants to know what their customers are thinking, resulting in tens of billions in annual spending on consumer information research,” said Sanjeet Mitra, George Kadifa and Sofija Ostojic, the three directors of Sumeru. who run this agreement. , in a joint press release. “Zappi has re-engineered the entire process using innovative technology to enable businesses to engage with customers in real time, enabling meaningful product and advertising decisions to be made more efficiently and thoughtfully. We are incredibly excited to partner with the Zappi team and are proud to invest in a company that has culture and community impact at the center of its strategy. All three join the board with this turn.